Introduced as a way to unify securities markets across Europe, the TARGET2-Securities (T2S) initiative has seen its share of setbacks—including at least two disclosed delays since 2006 and the doubling of development costs. However, its setbacks should not distract from the ambitious goal underpinning T2S, and the opportunities it presents for healthy competition and increased efficiencies.

Challenges to T2S

Given the scope of T2S, it is not surprising that disagreements have emerged. Some key areas include:

  • Pricing
  • Governance
  • Service level agreements
  • Contract termination
  • Liabilities regime

In addition, some market players have expressed concern that the T2S testing and migration windows are insufficient.

Benefits in T2S

While there will continue to be hurdles in implementing T2S, the potential benefits are tremendous. Already Europe has seen rationalization up the value chain through the mergers of exchanges and central counterparties. Accenture believes that T2S will continue this trend to streamline settlement processes, increase competition and lower costs for many.

Amid the uncertainty surrounding T2S, market players have an opportunity to position themselves for success. In particular, they should:

  • Reevaluate current local market settlement links
  • Rethink service offerings to leverage new liquidity pooling opportunities
  • Assess the affect that T2S will have on strategy, operations and technology platforms

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